Entry considerations

A candidate is a perpetual-futures leg on Hyperliquid or Coinbase International paired against an offsetting hedge leg (a stock or ETF via Interactive Brokers). An entry is only logged as a paper trade when the funding rate has stayed above the research threshold for a minimum persistence window, the basis is inside a defined limit, and open interest clears a liquidity floor. Full current thresholds are versioned below.

Funding persistence

A single high funding print is not sufficient — funding that spikes and immediately fades would resolve before a real position could be managed. Persistence is measured as the fraction of recent snapshots that continuously met the entry condition; instruments that only spike briefly are treated differently from those with a sustained condition.

Exit scenarios

Positions close on one of a small number of explicit triggers: an emergency reversal in funding (no grace period), a sign-flip that persists past a grace window, funding decaying below a floor for a debounce period, or a maximum hold duration. Manual closes exist for operational reasons and bypass market-hours checks.

Hedge construction & the naked-leg gap

The perp leg trades 24/7; the hedge leg only trades its own market's hours. When an exit fires while the hedge market is closed, the perp leg is closed immediately (to stop the funding bleed) and the hedge leg is deferred to the next open — sitting unhedged in the meantime. That gap is priced as naked_leg_pnl: pure directional exposure on the hedge instrument, uncorrelated with the funding thesis. See What happens when the perp closes before the hedge.

Costs

Every simulated trade carries a modelled round-trip fee (venue taker/maker fee plus the hedge broker's commission) subtracted before any result is called a win. Where a hedge price is a normalized or transformed reference — for example, an ETF standing in for an underlying commodity — that is disclosed on the instrument page rather than presented as an ordinary executable quote.

Net P&L vs. all-in ("True") P&L

Two figures are shown throughout this site and they answer different questions:

  • Net P&L — the strategy's own accounting: funding earned, minus fees, plus only the naked-leg price movement (the piece of price risk the strategy actually took on by deferring a leg past market close). It is what drives win/loss counts.
  • True P&L (all-in) — funding minus fees plus both legs' full price movement over their entire hold, including the portion that occurred while both legs were hedged and should, in theory, have cancelled out. It exists to show what would have shown up in a real brokerage statement, including any imperfect hedge execution.

The two will usually be close but not identical. Both are shown side by side on the Lab Portfolio page — never one without the other.

Data completeness

The Lab Portfolio includes every trade this research has opened — none are excluded by date. Net P&L is available for every closed trade, since the underlying system computes it for each one. True P&L (all-in) and the per-leg price breakdown (Perp P&L, Hedge P&L) additionally require entry and exit prices on both legs, which the source system only began reliably recording partway through this project's history. Where that data isn't available, those figures are shown as unavailable rather than zero.

Limitations

  • This is a paper-trading simulation. No real orders are placed on either leg; fills are modelled at observed quote prices, not a certified execution.
  • Yahoo Finance and venue APIs occasionally return stale prices right at a market open — see the Research Journal for a documented instance and its fix.
  • Ordinary overnight/pre-market gap risk on the hedge leg is inherent to running a 24/7 leg against a market-hours-only leg; no rule eliminates it, only the sizing of how long a leg is allowed to stay naked.
  • Classifications shown here (entry conditions, exit reasons) are research labels, not trading signals or investment advice.